Multinational Corporations - Federal power versus the power of the
multinationals: the oil dilemma

A power with great wealth and influence, the oil industry has often been
seen by historians as a sovereign entity capable of dictating the terms
and conditions under which oil is produced and sold throughout the world.
Although this view is still widely held, it was especially prominent
during the energy crisis of the 1970s, when a slew of books was published
highly critical of oil's alleged power over the public weal.
Inter-industry correspondence and memoranda, first revealed in
congressional hearings in the 1970s, seemed to substantiate this view. So
did the outcome of an antitrust action that the Department of Justice
brought in 1953 against the five major U.S. oil
corporations—Standard Oil of New Jersey (Exxon), Gulf, Socony Mobil
(Mobil), Standard Oil of California (Socal), and Texaco—and two
alleged coconspirators, Royal Dutch Shell and Anglo-Iranian Oil (now
British Petroleum), charging them with maintaining monopolistic control of
oil from the Middle East. The case was so sharply curtailed before it was
settled in 1968 that it left the multinational giants' control of
oil from the Middle East largely intact. For this reason it seemed to
provide additional support to the argument that the multinational giants
dictate federal policy.

There can be little doubt about the historic power of the oil industry to
influence—and sometimes dictate—federal policy. If anything,
however, the oil cartel case of 1953–1968 reveals that it was the
federal government that used the oil corporations for foreign policy
purposes rather than the other way around. In perhaps the darkest period
of the Cold War, the oil cartel ensured a cheap supply of energy to
western Europe and Japan. It also ensured a certain degree of stability in
a troubled area of the world and was a way of limiting Soviet influence in
the region, a matter of great concern to policymakers in Washington.
Through tax policies that allowed the oil companies to offset increased
royalties to host nations with decreases in taxes paid to the federal
government, the oil companies also provided a useful conduit of financial
aid to Arab producing nations without providing a cause of action on the
part of the strong pro-Israeli forces on Capitol Hill.

Through the fifteen-year history of the oil cartel case, in fact,
officials of the Department of Justice remained at loggerheads with the
Department of State about pursuing the case, with antitrust officials in
the Justice Department anxious to prosecute the defendants and the State
Department opposing prosecution on the basis of national security and the
national interest. In the end, the Department of State prevailed.